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Advanced Technical Analysis - Intraday Flash

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Note: the following analysis is formulated as an assimilation of Fibonacci, DeMark, Elliott Wave and other technical indicators. It is offered as education and not intended as advice in any way.

Wednesday's AM note suggested that we needed to see "5" waves up from the lows on 9/28 in the SPX and NDX into the Fibonacci target range of SPX 1146/1147 and NDX 1470-1480 that came with both hourly divergences and hourly Demark trend exhaustion indicators. At this stage almost all of the prerequisites have been met, suggesting that, if the peaks registered this AM in the NDX and yesterday in SPX weren't the 5th wave peaks we were looking for, then the markets are more than 95% of the way there.

Breadth peaked on 10/1 and has diverged ever since, ticks peaked on 10/1 also and diverged at the recent peaks, hourly momentum is diverged noticeably on the new peaks, volatility (VXO) diverged on the recent peaks, and hourly Demark trend exhaustion indicators are near registering for the NDX while, in the last three days the SPX, the NDX, the NDX futures, and the SPX futures, have all registered daily Demark trend exhaustion indicators. Add to that the following sentiment picture: Market Vane's Bullish Consensus just recently registered 67% bulls, which is the same percentage of bulls registered at the June SPX bounce peaks, 2 points less than the April bounce peak, and three points less than the March peaks in the SPX. Add to that the weekly Investor's Intelligence investment advisors survey that shows that bulls are 52.6% vs 24.2% bears, a reading that compares to 56.3% bulls at the June SPX peaks and 60.2% bulls in Q1:04 which was the highest reading for the entire move up from October 2002.

When combined with the completed wave count off the 9/28 lows right into important Fibonacci resistance targets, the presence of both daily and hourly Demark signals, and the presence of hourly momentum, ticks, breath, and volatility divergences, the current market position suggests a tradeable top of some degree could be nigh. If the recent peaks in the SPX and NDX aren't those important peaks, these technical indicators suggest it isn't much further into our SPX 1146/47 and NDX 1470-1480 targets.

So the short term analysis is thus: a break of SPX 1132, NDX 1452, and INDU 10144 (and any subsequent 3 wave corrective bounce) could begin a downtrend unless trade powers through the recent peaks: SPX 1142.05, NDX 1474.70, and INDU 10270.30, at which time I'd have to reanalyze. First potential Fibonacci supports are SPX 1116-1126, NDX 1413-1437, and INDU 9930-9980.

Recall that we said on Wednesday and Monday of this week that we could not be sure (confident) about the intermediate term trend (bullish or bearish). That remains true today, though clearly the patterns in the SPX and INDU, along with the daily Demarks and the sentiment picture described above favor the bearish trend interpretation. What this means for the analysis is that we have "high" confidence that at least a short term peak is near that could take prices down to the above cited "first" Fib support levels. We would only be able to move our confidence rating to "high" for the intermediate term trend if those cited "first" support levels gave way impulsively and moved below SPX 1110, NDX 1405, and INDU 10035. A break of those levels would then strongly invigorate the intermediate term (multi-week/month) bear case. Stay tuned.

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No positions in stocks mentioned.

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